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TMI Blog2004 (11) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... delivered by Prakash Krishna J. At the instance of the Revenue, the following question of law has been referred by the Income-tax Appellate Tribunal, Delhi, for the opinion of this court: "Whether, on the facts and in the circumstances of the case, the assessee was entitled to relief under sections 80J and 80HH for the assessment years 1976-77 and 1977-78?" The assessee is a registered firm manufacturing rice and dealing in food grains. Its claim for relief under sections 80J and 80HH of the Income-tax Act, 1961 (hereinafter referred to as "the Act") in respect of its rice manufacturing business was disallowed by the Income-tax Officer on the ground that the assessee did not employ ten or more workers in the manufacturing process and, therefore, it did not satisfy the conditions of section 80J(4)(iv) and section 80HH(2)(iv) of the Act. But the claim of the assessee was accepted by the Commissioner of Income-tax (Appeals) for the assessment year 1976-77 as well as by the Income-tax Appellate Tribunal. The controversy in the present case centres round the question of the number of workers employed in the manufacturing process carried on by the industrial undertaking. Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpretation. Ordinarily, it starts with the procurement of raw material and terminates with the production of the finished article. All the workers engaged throughout the process would be considered to be employed in the manufacturing process of rice and rice bran. Ordinarily, the provision in a taxing statute granting incentive for promoting growth and development should be construed liberally. These provisions should be interpreted so as to advance the objective of the provision and not to frustrate it (Bajaj Tempo Ltd. v. CIT [1992] 196 ITR 188 (SC)). The apex court in the case of Textile Machinery Corporation Ltd. v. CIT [1977] 107 ITR 195, while interpreting section 15C of the old Indian Income-tax Act, 1922, which corresponds to section 80J of the Act has observed that the principal object of the section is to encourage the setting up of new industrial undertakings by offering tax incentives within a period of 13 years from April 1, 1948. The section is an exemption section. After the country has gained independence in 1947 it is most essential to give a fillip to trade industries from all quarters. That seems to be the background for insertion of section 15C of the Act, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above expression would include persons employed in operations incidental to the main industry. The facts of that case do show that the persons malis (gardener) employed in the bungalow with attached garden in the colony of the mil] were employed by the mill to look after these gardens and their conditions of service are determined by the mill. Their work was supervised and controlled by the mill and payment was made by the mill. In this background if was held that malis were included within the expression "employed in any industry" in the definition of "workmen" in section 2(s) of the Industrial Disputes Act. The apex court was considering entirely a different controversy in that case, not involved in the present case. The interpretation by the Supreme Court on the expression "employed in any industry" will have hardly any bearing on the taxing statute like income-tax while construing sections 80HH and 80J of the Act. Learned counsel for the assessee submitted that in the absence of any definition of the word "worker" under the Income-tax Act, the court has to take its ordinary meaning, which may mean casual, permanent or temporary. Reliance was placed upon CIT v. K.G. Yediy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eved by granting exemption or concession from tax on a certain portion of profits for the specified period. Sub-section (4) of section 80J lays down the conditions which an industrial undertaking is required to fulfil to claim the benefit under section 80J of the Act. Section 80J of the Act applies to the industrial undertaking and prescribes conditions qua industrial undertaking and to grant relief to the assessee. Section 80J(4)(iv) has to be interpreted in the light of other provisions of section 80J. The emphasis under section 80J is on the phrase "industrial undertaking manufacturers or produces articles" ten or more workers would be employed in the manufacturing process carried on by the industrial undertaking. The words "employs ten or more workers in the manufacturing process" normally would cover the entire process carried on by the industrial undertaking of converting the raw material into finished goods. The work of ten or more persons employed in the manufacturing process should be integrally connected with the manufacturing of rice. Their work should be reasonably connected with and be part of the manufacturing process of rice. The Income-tax Officer while holding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with actual manufacturing process will also be within the aforesaid expression. The Tribunal, as a last fact-finding authority has found that the workers employed for bringing the paddy bags from outside and keeping it in the factory can also be called "workers employed in the manufacturing process" as the manufacturing process cannot be carried on unless paddy bags are available represents the correct view of law and is in consonance with the plain meaning of the word implied under section 80J(4)(iv) of the Act. The apex court in the case of CIT v. Gwalior Rayon Silk Manufacturing Co. Ltd. [1992] 196 ITR 149 has held as follows with regard to the interpretation of statutes granting deduction, exemption, or relief to the taxpayer: "It is settled law that the expressions used in a taxing statute would ordinarily be understood in the sense in which it is harmonious with the object of the statute to effectuate the legislative intention. It is equally settled law that, if the language is plain and unambiguous one can only look fairly at the language used and interpret it to give effect to the legislative intention. Nevertheless tax laws have to be interpreted reasonably and in conso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght modify the language used by the Legislature so as to achieve the intention of the Legislature and produce a rational result." What is even more significant is the observation of the court in this case wherein it was observed: "Though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction." In a subsequent decision reported in Saroj Aggarval v. CIT [1985] 156 ITR 497 again the Supreme Court observed as follows: "Facts should be viewed in natural perspective, having regard to the compulsion of the circumstances of a case. Where it is possible to draw two inferences from the facts and where there is no evidence of any dishonest or improper motive on the part of the assessee, it would be just and equitable to draw such inference in such a manner that would lead to equity and justice. Too hyper technical or legalistic approach should be avoided in looking at a provision which must be equitably interpreted and justly administered." We are of the view that the various processes starting from purc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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